Know-Your-Customer, or KYC, refers to a set of due diligence practices that banks, financial institutions, merchants, etc., must perform on customers before doing business with them. The goal of these practices is to stop identity fraud. Identity fraud leads to other fraud schemes, such as application fraud or card fraud.

KYC policies are often a necessary part of doing business, as they are set and regulated by a government agency. Bank regulators enforce KYC standards to prevent corruption, identity theft, financial fraud, money laundering, terrorism financing, and more.

Why Should I Know My Customer?

KYC policies are essential to blocking many fraud schemes across the customer journey. While governments require several know-your-customer policies, there are additional benefits to your bottom line.

Tools like identity verification, screening against terror watch and “politically exposed persons” (PEP) lists, and transaction behavior monitoring can quickly stop many fraudsters from attacking your business and profits.

Synthetic identity fraud is being called the “fastest-growing financial crime” by the Federal Reserve after online lenders reported over $6 billion in losses per year. So, KYC practices can make a sizeable impact on the safety of your company and profits.

What Happens If I Don’t?

Failing know-your-customer regulations could cost your business in many ways. First of all, failure to comply could have hefty fines, often in the millions, depending on how severe the non-compliance is. This can cut deeply into your bottom line, not to mention the cost of identity fraud itself.

Additionally, failure to perform KYC checks could result in a loss of reputation and trust with customers. They view businesses without identity verification practices as untrustworthy or more likely to compromise their information.

Also, KYC and anti-money laundering (AML) regulations often go hand-in-hand, as KYC is an essential part of the anti-money laundering process. With money laundering comprising 2-5% of the world’s GDP (or roughly $2 trillion), KYC and AML processes are strictly regulated, and non-compliance has an expensive price tag.

How Can I Know My Customer?

Any good KYC framework requires four components in order to be effective:

1. Customer Identification

Most identification practices include some sort of legal document verification (such as a driver’s license, birth certificate, death certificate, etc.) to score an identity. Others may require multi-factor authentication to verify identity or account/transaction activity.

2. Customer Acceptance

The most efficient practice is for companies to allow legitimate customer activity while flagging and stopping potentially fraudulent activity. One can do this with rules-based fraud detection services, but the tool should be optimized to avoid false positives and auto-cancel potential fraud. An inefficient acceptance can lead to major customer friction, but with AI and machine learning, verification and acceptance tools can be streamlined.

3. Transaction Monitoring

Transaction monitoring tools look at millions of data points, compare payment data with known stolen credit card information, and detect inconsistencies in customer behavior. For example, if an IP address of a purchaser doesn’t match billing or shipping information. Or if a customer is purchasing goods at a much higher velocity (ratio of clicks/purchases to a period of time) than normal.

With AI, transaction monitoring tools lessen the impact of fraudulent transactions and can do so before they happen. These tools do so by scoring against previous transaction outcomes and decisions. With an optimized tool, one can monitor transactions and enjoy a decreased false positive rate and less time to review.

4. Ongoing Risk Management.

Unfortunately, KYC policies aren’t one-size-fits-all. Some fraudsters attempt to skirt existing policies or evolve their practices in response to new regulations. So, you need ongoing risk management in the form of regular updates to the solution to keep up with evolving threats. Or, you need AI and Machine learning to create a “perpetual KYC” that constantly updates and evolves with new information.

With these four key components, and the addition of advanced technology, KYC practices can help combat costly fraud schemes, comply with regulations, and protect your profits.’s KYC Tools and Technologies’s unified platform combines proprietary data, artificial intelligence, and deep-learning algorithms to perform KYC checks on incoming applications and transactions.

With automated and AI-powered tools, you can instantly view risk scores, reduce false positives, and decrease the time to review flagged transactions with comprehensive analytics and reporting dashboards.

Additionally, our platform allows you to Know-Your-Vendor too, protecting your business from fraudulent or malicious third-party vendors, supply chain issues, and sanctioned organizations using a very similar process.

Leverage multiple leading vendors of identity solutions within our proprietary AppStore, as well as the insights of our comprehensive Collective Intelligence Network, to ensure the identities you’re dealing with are legitimate.

Learn more about’s KYC platform and how we can help you avoid costly fines, protect your profits, and increase your ROI.